The FAANG shares have been bitten hard and are now in a bear market.
At the end of official close in the US market earlier today:
The Apple share price was down 4.8%
The Amazon share price fell 1.1%
The Microsoft share price dropped 2.8%
The Netflix share price was in the red by 1.3%
However, it looks much worse since their all-time highs earlier in the year. The Facebook share price is down 39%, Amazon is down 27% and Apple is down 24%. It's a similar story for the other tech shares.
Collectively, we have seen a NASDAQ exchange-traded fund (ETF) on the ASX, being the BetaShares NASDAQ 100 ETF (ASX: NDQ), fall by 15% since its high in October last month.
Rising interest rates have damaged the valuations of the tech shares significantly. Trade wars, worries about political intervention and slowing growth are also factors for some of the NASDAQ heavyweights.
Some bearish analysts point to a stagnant user base for Facebook. Apple's smartphone sales surely can't keep rising, right? Amazon is trading at a silly valuation. And so on.
However, this does not strike me like the 1999 dot com bust. All of the FAANG shares are generating huge revenues and most of them are reporting big profits. Compared to our ASX tech darlings like WiseTech Global Ltd (ASX: WTC) and Afterpay Touch Group Ltd (ASX: APT), shares like Facebook and Alphabet (Google) seem positively cheap for their growth rates.
Foolish takeaway
Whilst it is true to say that rising interest rates should be a dampener on valuations, the sell-off seems overdone considering the huge balance sheets and continued good growth prospects of online advertising, cloud computing and so on.
After the latest falls they look even better value. But, that doesn't mean they won't fall further from here over the next few months.
